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Unformatted text preview: Department of Economics University of California, Berkeley ECON 100A Microeconomic Analysis Fall 2009 Problem Set 5 1 True or False (a) Both ABC Inc and XYZ Corp have a dominant Strategy. ABC Inc Expand West Expand South XYZ Corp Expand West 10,50 50,70 Expand South 20,90 40,80 (b) When there is Monopolistic Competition, there is no deadweight loss, because firms will enter the market until profits are equal to zero. (c) In the symmetric Cournot game with N firms, linear market demand p ( Q ) = a- bQ and constant marginal costs c , when the number of firms increases, each individual firms profit falls, but aggregate producer surplus rises. (d) A Stackelberg leader will necessarily make at least as much profits as if he acted as a Cournot oligopolist (e) A situation in which everyone is playing a dominant strategy must be a Nash equilibrium (f) In a Nash equilibrium, every player must be playing a dominant strategy....
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